Now that the Olympic games in China are over, the next major sporting event in the world will be the FIFA World Cup in 2010 to be held here in South Africa. All eyes will be on South Africa, not only in the build up to the event but also after the event. A lot of money and resources are being put into this world show piece event. Some have said, too much money is being spent by the government for an event that will only last one month. A question you hear being banded around a lot these days is, “What will happen after 2010?”

Jason Simpkins from Money Morning takes a look at the China economy during the Olympics games below. Maybe we can see how the Olympics affected China and see if the same will happen in 2010 in South Africa :

Despite a flood of investment leading up to the 2008 Olympic Games, economic conditions in China have been on the decline for the entire month of August, leading some analysts to warn of a post-Olympic slowdown. But the Chinese economy so far has proved resilient, and with policymakers in Beijing scrambling to ensure economic growth, it will likely escape a significant downturn.

The Shanghai Stock Exchange’s Olympic event was diving. The Shanghai Composite Index dropped roughly 12% between the opening and closing ceremonies of the games. It’s now down about 60% from its October high. The steep drop came as a harsh surprise to many Chinese investors who were expecting the Olympics to be a boon for the economy.

“Everybody said the market would turn [positive] in July before the Games, so we listened and stayed in it,” one trader told the Los Angeles Times. “In July, they said that the market’s spirit would return when the Olympics came. What spirit is that? Now we are all dead and have no spirit left in the market.”

There is no single explanation for the index’s decline, but it can mostly be attributed to a rash of data that suggests China’s high-flying economy is beginning to wobble in line with a global downturn.

“Recent data suggested that the slowdown has taken a firmer hold of the economy and the Olympics may present some downside risks,” Citibank economist Ken Peng said.

China’s industrial output slowed to a 17-month low in July as weakening exports hit factory production across the nation. Industrial production grew by 14.7% in July, down 16% in June and 18% percent in July of last year, the National Bureau of Statistics reported.

“The deceleration in export growth was the main reason for the slowdown in industrial output,” the bureau said, adding that export growth for the month was 26.9%, compared to 34.2% in July 2007.

Also, producer price pressures remain high even though consumer prices that climbed to a 12-year high of 8.7% in February receded to a 6.3% increase in July. Increased costs for labor, energy, and commodities caused producer prices to jump 10% from a year earlier in July - an indication that corporate profit margins are caught in a vice.

China’s gross domestic product (GDP) growth now has decelerated for four consecutive quarters. China’s GDP grew 10.1% in the second quarter, after expanding by 11.2% in the fourth quarter of 2007, and 10.6% in the first quarter of 2008.

GDP growth is expected to slow even further as economic conditions throughout the world continue to deteriorate. Standard Chartered Bank has said China’s rate of growth will slow to 9.9% in 2008 and 8.6% in 2009. China’s economy grew 11.9% in 2007.

Those rates of growth may still sound impressive but a nation as large as China needs economic growth to come along much faster than its Western counterparts.

“China needs much faster growth than an average Western country as it has to generate 10 million jobs a year,” Tao Dong, chief Asia economist at Credit Suisse Group AG (ADR: CS) told Bloomberg News. “Eight percent growth in China is equivalent to a recession. Below nine percent would make the authorities quite nervous.”

Mingchun Sun, China economist at Lehman Bros. Holdings Inc. (LEH) says GDP for the second half of 2008 will slow to 8.7% in the second half of 2008, and just 8% for all of 2009.

“If growth goes lower than 8% the government will be very worried,” says Sun, who sees only 2 million jobs being created. “This is important because unemployment is related to instability.”

Original article by Jason Simpkins - Money Morning - China’s Economy Looks to Rebound After Lackluster Olympics

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